From the Front Page - Breaking News

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[Independence Bancshares](http://www.independencenb.com/) - a publicly traded (albeit [thinly](http://finance.yahoo.com/q/hp?s=IEBS+Historical+Prices) on the OTC:QX), FDIC-insured, community-based bank in Greenville, South Carolina - seemed poised to become the first bank in the United States to embrace Bitcoin payments, according to three patents published by the United States Patent and Trademark Office. However, after speaking with Chief Executive Officer Gordon Baird, Let's Talk Bitcoin has learned that Independence Bancshares has clearly distanced themselves from Bitcoin, but is "studying virtual currencies." Read More

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Recent publications by the US federal government indicate that Bitcoin will likely be used in illicit cross-border transactions, and that the Office of National Drug Control Policy (ONDCP) is ramping up efforts to detect and interdict bitcoin transactions. There is a special focus on Canada and the United States. Read More

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Hi Brian. William Suk here. I just wanted to say that your article popped up in my feed just now -- I'm an occassional editor. Great reporting. I always like your stuff. I have one small editorial suggestion -- put your claim front and center in one or two lines at the start of the piece. (I know it's partially in the title.) You began by mustering your evidence, and it's a great narrative, but I think it would be good to tell readers immediately what the newsworthyness is. Something like "The DEA has been implicated in a case of mistaken identity during its recent bitcoin seizure." Then tell your story.
You know, I have been interested in this idea of confiscated bitcoin. From a sociological viewpoint it is very interesting to me that the Silk Road coins makes the US government a major "stakeholder" in Bitcoin. It's one of the largest wallets if I'm not mistaken. You would know better.
Also, the DEA's reticence to release information is not surprising. My suggestion: FOIA the heck out of them. The FBI, NSA and other agencies could have carried out bitcoin siezures as well. I've done a couple of FOIA requests with other agencies and I'd love to get my hands dirty with the DEA.
The Drug Enforcement Agency(DEA)appears to be involved in a case of mistaken identity in regards to last year's Bitcoin seizure. A new seizure notice that was just issued with an identical wallet address which had previously been listed as belonging to "Eric Daniel Hughes" now is associated with an "Unknown" user.
On June 23, 2013 I broke the first ever Bitcoin seizure story with Let's Talk Bitcoin Editor in Chief Adam B. Levine and his crack team of investigators [Dan Roseman](http://www.coinality.com/), [David Perry](http://www.codinginmysleep.com/), [Justus Ranvier](http://bitcoinism.liberty.me/) and [George Ettinger](http://letstalkbitcoin.com/profile/user/george).
The article, [Users Bitcoins Seized by DEA](http://letstalkbitcoin.com/post/53700133097/users-bitcoins-seized-by-dea) garnered [international coverage](http://www.scoop.it/t/briancohen/?tag=seizure) and initially ran on [LTBs Tumblr](http://letstalkbitcoin.tumblr.com/post/53700133097/users-bitcoins-seized-by-dea).
The article began:
>The Drug Enforcement Administration posted an Official Notification that Bitcoin (i.e. property) belonging to Eric Daniel Hughes was seized for forfeiture pursuant to 21 U.S.C. Read More

Not all electronic payments involve electronic money. For instance, credit cards or debit cards are not electronic money because no monetary value is stored on them; and store cards or internet-based currency (such as Bitcoins [13] or gaming money) are not electronic money because these are not widely accepted as a medium of exchange.

Scrolling down to the referenced footnote 13 we find:

Bitcoin also does not meet the definition of a currency as it is not issued or authorized by a central bank or government.

Therefore we must assume that the IMF presently defines currency as issued or authorized by a central bank or government. Oddly at the same time, the manual states that Bitcoin is and is not a currency. The author chose the term "internet-based currency" rather than the more common terms "virtual currency" or "digital currency." Maybe the IMF is confusing Bitcoin with "Internet-based payment services" which is a commonly used term (and Bitcoin is a payment network in addition to being a virtual currency). The G7 connected FATF (Financial Action Task Force) prepared a document in June 2013 entitled "Guidance For A Risk-based Approach Prepaid Cards, Mobile Payments and Internet-Based Payment Services" (PDF).

I was able to find reports from 2011 and 2012 from the IMF that define currency in part as "..consist{ing} of notes and coins that are of fixed nominal values and are issued or authorized by the central bank or government."

Currency consists of notes and coins that are of fixed nominal values and are issued or authorized by the central bank or government. Although all government subsectors hold currency, generally only the central bank issues it. Deposits are all claims, represented by evidence of deposit, on the deposit-taking corporations (including the central bank) and, in some cases, general government and other institutional units.

Currency consists of notes and coins that are of fixed nominal values and are issued or authorized by the central bank or government. In some countries, commercial banks are able to issue currency under the authorization of the central bank or government, Currency constitutes a liability of the issuing units. Unissued currency held by a public sector unit is not treated as a financial asset of the public sector or a liability of the central bank. Gold and commemorative coins that are not in circulation as legal tender, or as monetary gold, are classified as nonfinancial assets rather than currency."

The IMF definition of currency appears to be a derivative work of the European System of National Accounts from the European Commission in 2008. This document (Google Books) was drafted by European Commission, IMF, United Nations, World Bank and the Organization for Economic Co-operation and Development and defined currency as follows:

"Currency consists of notes and coins that are of fixed nominal values and are issued or authorized by the central bank or government. (Commemorative coins that are not actually in circulation should be excluded as should unissued or demonetized currency.) A distinction should be draw between domestic currency (that is, currency that is the liability of resident units, such as the central bank, other banks and central government) and foreign currencies that are liabilities of non-resident units (such as foreign central banks, other banks and governments.) All sectors may hold currency as assets, but normally only central banks and government may issue currency. In some countries, commercial banks are able to issue currency under the authorization of the central bank or government."

The Manual provides some history on this document and states that:

In 2000, the International Monetary Fund (IMF, or the Fund) published the Monetary and Financial Statistics Manual (MFMS), which was the first volume of its kind in the field of monetary and financial statistics.

The IMF appears to recognize the difficulty in defining or "classifying" certain financial instruments:

This Manual contains additional discussions on borderline cases in the classification of financial assets and liabilities.

Further, the IMF is willing to reclassify (i.e. redefine) some of these instruments:

An important revision concerning financial instruments is the reclassification of the special drawing rights (SDR) allocations to the Fund's member countries, from equity to long-term foreign liability. The change was introduced in August 2009 in the monetary data compiled by countries, with historical data having been revised correspondingly. Previously, SDR allocations were recorded as a unilateral transfer from the IMF to its member countries, and in monetary statistics recorded as part of equity.

It signals fear on the part of U.S. government officials that the dollar is slowly losing its luster as a reserve currency. U.S. officials are trying to nudge the SDR as the alternative to the dollar because they will still maintain significant influence with regard to the SDR, as opposed to some other currency taking hold in parts of the world as a reserve currency (the [Chinese] renminbi?) or gold returning as an important reserve. China and Russia are both presently accumulating gold.

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only publish between 3PM and 4AM Pacific Time
Recently I took out [Twitter to note my surprise](https://twitter.com/inthepixels/status/497581726005465088) that only a handful of folks have bothered to watch the "[Conference of State Bank Supervisors Public Hearing on Virtual Currencies](https://www.youtube.com/watch?v=0d7olT7R8so)" on YouTube which was part of a "[CSBS Emerging Payments Task Force Public Hearing on May 16, 2014](http://www.csbs.org/regulatory/ep/Pages/EPTFVideos.aspx)". This was a week after the Federal Advisory Council and the Board of Governors of the Federal Reserve [met and discussed Bitcoin at great length](http://bitcoinmagazine.com/13165/federal-reserves-bitcoin-policy-begins-take-shape/) at their quarterly meeting. The [speakers were announced on May 5](http://www.csbs.org/news/press-releases/pr2014/Pages/050514.aspx). This becomes even more surprising as the U.S. Government Accountability Office linked to the the hearing in its blog report "[Risks of Virtual Currencies](http://blog.gao.gov/2014/07/16/the-risks-of-virtual-currencies/)" in its "[Watchblog: Following The Federal Dollar](http://blog.gao.gov/)." I guess its a Watchblog with no one watching?

At the public hearing, Megan Burton, Chief Executive Officer, [CoinX ](https://www.coinx.com/)noted the overwhelming obstacles that they encountered with banking institutions. Though you probably wouldnt know this if you read the [transcription of the hearing](http://www.csbs.org/regulatory/ep/Documents/EPTF%20Hearing%20Panel%203.pdf) (PDF) which erroneously credits Annemarie or Annemarie Tierney, EVP Legal and General Counsel, SecondMarket with the comments:
>... We've actually been turned down by about 61 banks now. That's overwhelming. We never get to the word cryptocurrency. We state the word MSB and the conversation halts...
And further,
>I wouldn't say that it's specific to this panel that you see before you today. I think it stems specifically to us being put in a category of high risk. In this meeting, what was fascinating was the fact that when I talk about the transaction flow that we could potentially have, the sheer volume of what would go through...A community bank is typically not equipped to be able to handle that level of transaction volume, nor do they have the insight into my business to know how to gather enough information at the KYC process to know who we're touching and what we're doing.
Moreover,
>There needs to be a bridge between where we are as a MSB in a high risk category and where the banks are and how they're being regulated to be able to facilitate better communication between the two.
Burton's comments on community banks is interesting. When larger institution are rejecting Bitcoin companies applications they are putting additional pressure on smaller banks, i.e. community banks who are being approached to fill this void.
And what can community banks use as guidance when dealing with these newfangled Bitcoin companies?
Well, on June 23, five weeks after the Conference of State Bank Supervisors Public Hearing on Virtual Currencies, the ICBA or Independent Community Bankers of America Clearing House and The Clearing House (TCH) issued a thorough twenty five page white paper entitled [Virtual Currency: Risks and Regulation](http://www.icba.org/files/ICBASites/PDFs/VirtualCurrencyWhitePaperJune2014.pdf) (PDF). This report is also available as a PDF through short URL at [www.icba.org/virtualcurrency.cfm](http://www.icba.org/virtualcurrency.cfm) as well as the [TCH website](https://www.theclearinghouse.org/publications/2014/tch-releases-white-paper-on-virtual-currencies).
The [Independent Community Bankers of America](http://www.icba.org/) is the nations voice for more than 6,500 community banks with nearly 5,000 members, representing more than 24,000 locations nationwide and holds $1.2 trillion in assets, $1 trillion in deposits, and $750 billion in loans to consumers, small businesses and the agricultural community.
And further, ICBA member community banks create symbiotic relationships with the communities they serve, favor local decision-making, while adhering to the highest business practices and ethical standards, and support a democratically governed association where each member bank has a voice and a vote&
The Clearing House according to its website was {e}stablished in 1853 by the nations leading banks, The Clearing House originally functioned as the de facto central bank for banks in the United States long before the Federal Reserve was formed&
and as noted in the white paper,
>The Clearing House is the oldest banking association and payments company in the United States. It is owned by the worlds largest commercial banks, which employ over 2 million people and hold more than half of all U.S. deposits. The Clearing House Association L.L.C. is a nonpartisan advocacy organization representingthrough regulatory comment letters, amicus briefs and white papersthe interests of its owner banks on a variety of systemically important banking issues. The Clearing House Payments Company L.L.C. provides payment, clearing, and settlement services to its member banks and other financial institutions, clearing almost $2 trillion daily and representing nearly half of the automated clearinghouse, fundstransfer, and check image payments made in the U.S.
The white paper also makes reference to the Conference of State Bank Supervisors:
>...A large number of U.S. states currently participate in the Nationwide Mortgage Licensing System (NMLS), a web-based utility operated by the Conference of State Bank Supervisors State Regulatory Registry, through which participating states and the federal government ...has recently been expanded to permit states to utilize the system to administer licensing of payday lenders, money transmitters, check cashers, and other types of consumer financial service providers...The existing NMLS infrastructure could be expanded to include licensure of virtual currency market participants..
Perhaps it is a bit surprising that ICBA was involved in drafting the report because while it was being drafted, Cary Whaley, Vice President of payments and technology policy for ICBA told Bloomberg news in [Bitcoin Breakthroughs Studied by Banks the Currency Is Out to Replace](http://www.bloomberg.com/news/2014-05-07/bitcoin-breakthroughs-seen-copied-by-banks-it-s-meant-to-replace.html) that they had no interest in using Bitcoin:
That reputation makes banks reluctant to use the digital currency directly, said Cary Whaley, a vice president at the Independent Community Bankers of America. While virtually none of the groups members are interested in using the digital money, a small number are examining its concepts, he said&
However, the regulatory scrutiny that community banks face has been compared to that of virtual currency upstarts in Informationweek Bank Systems & Technology [How New York State Is Looking to Regulate Bitcoin](http://www.banktech.com/compliance/how-new-york-state-is-looking-to-regulate-bitcoin/d/d-id/1296859) as well as PaymentsSource [New York Sees Bitcoin as a Catalyst for Modernizing Regulation](http://www.paymentssource.com/news/new-york-sees-bitcoin-as-a-catalyst-for-modernizing-regulation-3016794-1.html); both of which use NYDFS as a reference. And shortly after the report was released [there were grumblings on BitcoinTalk](https://bitcointalk.org/index.php?topic=689587.0) about banks and in particular community banks interest in Bitcoin.
Too big too fail doesnt mean too small to succeed. Community banks importance to the financial system became clearer during the 2008 financial crisis which illustrated what happens when banks become too big to fail. In July, [the Senate approved an amendment](http://blogs.wsj.com/economics/2014/07/17/senate-approves-move-to-reserve-fed-seat-for-community-banks/) to reserve a seat on the Federal Reserve Board of Governors for an individual with community banking experience. It is interesting to note that OTC Markets Group Inc which operates financial marketplaces for 10,000 U.S. and global securities recently [announced](http://finance.yahoo.com/news/otc-markets-group-welcomes-banks-110000336.html) the first banks to trade on the [OTCQX marketplace](about:blank) under a new streamlined qualification process for U.S. community and regional banks. This also happens to be where [SecondMarket (i.e. Bitcoin Investment Trust) is proposing to launch a bitcoin investment fund](http://online.wsj.com/news/articles/SB10001424052702304026304579449782511589924) for ordinary investors in competition to the [Winklevoss Bitcoin ETP](http://letstalkbitcoin.com/post/55120007013/winklevoss-bitcoin-etf-may-not-be-redeemable-in) commonly referred to as an ETF.
A statement of purpose for Virtual Currency: Risks and Regulation succinctly explains the goal of this document:
>The purpose of this white paper is to promote consideration of how existing regulatory regimes in the U.S. may be applied to virtual currency, virtual currency system participants and products, and virtual currency transactions.
I hand picked some additional quotes from the paper and found the footnotes particularly interesting:
>Under the current federal regulatory regime, players in the Bitcoin system are not subject to safety and soundness oversight, and no entity in the Bitcoin system is yet large enough to be subject to oversight as a systemically important institution or utility, even were such regulations applicable.
_
>Live market capitalization of 158 convertible virtual currencies can be viewed at [https://coinmarketcap.com](https://coinmarketcap.com/)
_
>Primary sources for this section {The Bitcoin System and Bitcoin Transactions.} are the Nakamoto paper cited at fn. 7, above; CoinDesks A Beginners Guide to Bitcoin (available at http://www.coindesk.com/information/); and Blockchain.info, which hosts the publicly searchable blockchain database and technical information regarding Bitcoin mining.
_
>Given the lack of international consensus regarding classification and treatment of virtual currencies, the regulatory approach ultimately adopted by the U.S. is likely to have a significant influence on the shape of the global virtual currency economy in years to come.
_
>Notwithstanding the use of the term wallet, it is not necessary that users store their Bitcoins in their wallets. In fact, for security reasons, users are often advised to store a list of their Bitcoin serial numbers [sic] on paper, a USB key, or a non-internet-connected hard drive (all of which are referred to as cold storage or cold wallets) rather than in an online (or hot) wallet. The user must then load the Bitcoin into the wallet prior to using it for a transaction.
_
>...in some cases, there will be no wallet provider associated with a Bitcoin wallet. Where there is no wallet provider, there is no entity that can be subject to regulation other than the user. Regulating the user would not likely be viewed as furthering the consumer-protection policy that motivates much of the existing payments regulatory framework.
_
>Given the limited size of the virtual currency economy, no virtual currency exchange or wallet currently is likely to satisfy the requirements that must be met to be eligible for designation as a systemically important FMU {Financial Market Utility} or as engaging in systemically important PCS {payment, clearing, and settlement} Activities.
_
>It is unlikely that exchanges that accept and maintain fiat currency accounts would be deemed to be taking deposits for purposes of U.S. banking laws, as (i) most exchanges that engage in such activity use a bank custodian model and (ii) most virtual currency exchanges are either located outside the U.S. and/or have established banking relationships with non-U.S. depository institutions.
_
>...a team of core developers, led by developers allegedly appointed by Satoshi Nakamoto, has a leadership role in proposing changes to the Bitcoin protocol. However, that team has no authority to force the Bitcoin community to accept such changes.
_
>...one existing unregistered virtual currency exchange advertises that it will be offering customers the ability to earn interest on the Bitcoins those customers deposit with the exchange at an attractive rate. In this regard, the exchange could be seen as offering a security (an investment contract) to its customers&
_
>...While virtual currency market participants may eventually develop an insurer similar to the FDIC or SIPC, or may even be able to obtain insurance coverage from private insurers in a more de-centralized fashion, in the absence of a meaningful insurance fund, regulators should ensure that consumers and others engaging in transactions on virtual currency exchanges receive adequate warnings of the risks involved in that activity (e.g., that trading in virtual currency products on an exchange is unregulated and risky, and may result in the loss of the consumers investment), similar to disclosures required for penny stocks or even the Surgeon Generals warning regarding use of tobacco products.
The white paper in part concludes that:
>This white paper has described certain of the risks faced by consumers and others that hold or transact in convertible virtual currencies, and has evaluated certain ways in which U.S. regulatory authorities may consider regulating virtual currency transactions, products and marketplace participants based on their functional similarity to other transactions, products and marketplace participants that are regulated. The failure of Mt. Gox earlier this year, and the value that may have been irretrievably lost in connection with that failure, serves as a perfect backdrop for this white paper. The aggregate number and value of virtual currency transactions and holdings in the U.S. is small relative to most other regulated payments transactions and trading markets. However, the emerging nature of the virtual currency marketplace creates an opportunity to develop and implement a regulatory framework to mitigate risk to consumers and others without unduly burdening innovation and while the structure of the marketplace remains malleable.
Image Credit: Cigarette Box is an altered [Flickr Image](https://www.flickr.com/photos/icerazor/5993241070/in/photolist-a8AVLA-aVR53T-Gngjf-muFW3-3f8aeo-7aNiBG-2k9UWE-fhLAKa-4GBm29-7Dy2eJ-83eMFA-83ePrm-gVPtf2-efCSdD-7bwFk4-e1ZxdD-83bEgB-a6hkgi-74ijhw-5fpdU8-adbj3P-hLmfHv-7XqRtY-hMo61U-chEMnw-bRgoQB-5miZHE-acgNkb-acgNk9-ej1Nod-gVVBPY-acgNkd-83bFo4-7SwHUY-a1ZRQj-93BVsy-97cd3t-dXPbrq-bkjPhC-coh5M7-coh5rL-61UemM-4SPd77-tTFai-dhgMTp-8aZBLx-9hLTZn-4GqPLC-8jjukA-4yZefv/) Read More

This week, the eBay Community team wants to hear your ideas about rewards & recognition for Community participation.

EcommerceBytes noted that:

In response to a question about what the eBay moderator meant, the moderator replied, For example, if eBay were to reward members for their Community participation, what types of participation should we consider? Number of posts? Number of correct responses?

While EcommerceBytes said the move smacks of desperation, I will offer a different perspective. This is a paradigm shift whereby users will actually create and share value of the network and not just transfer (i.e. reallocate) value across it.

In what seems to be synchronicity, eBay posted the weekly chat announcement on June 30th which was just a couple days after Lets Talk Bitcoin! (LTB) launched LTBcoin (see the announcement at Introducing LTBCOIN, our new crypto-rewards program for LTB Creators and Community. LTBcoin according to the tokens website is a brand new kind of thing. It is a crypto-rewards system where people who help LTB to be useful are rewarded for their efforts. And its built on Bitcoin! In describing LTBcoin (LTBc), I have said Purchase not required. Participation is (Twitter). In fact, you cant buy LTBc from Lets Talk Bitcoin! However, everyone and anyone who participates in the Lets Talk Bitcoin Network (LTBn) is rewarded and distributed LTBc based on their participation in the network. Content creators receive the most amount of LTBc for their efforts but anyone can submit content (blog posts, podcasts and videos). Similar to eBays value proposition, 2.25 million LTBc were initially distributed to LTB communitymembers with five or more forum posts and that registered a LTBcoin Compatible Address. LTBn is continually innovating and released Magic Words on July 17th in which a magic word is spoken on the podcast and listeners redeem the word on the Lets Talk Bitcoin website and are rewarded five times as many LTBc if they had read an article on the Lets Talk Bitcoin website...Yes, even reading an article on the website is worthy of an LTBc reward.

user-defined asset using the Counterparty protocol. Counterparty is built on Bitcoin and is secured by the Bitcoin network. Because of this, LTBcoin addresses are exactly the same as Bitcoin addresses. LTBcoin can be traded on the Counterparty distributed exchange for Bitcoin, XCP or other user-defined assets.

Ethereum

Ethereum is a distributed application software platform often referred to as Bitcoin 2.0. While Counterparty works on top of the Bitcoin blockchain, Ethereum is not compatible with Bitcoin (also see Overstock.coms o.info How to issue a cryptosecurity. On June 4th, prior to Ethereums ether sale, Ethereum posted a YouTube video of Chief Communications Officer Stephan Tual entitled What is Ethereum?. This video is the explainer that visitors first encounter when entering the Ethereum website. Tual explains that:

...another interesting application of this concept {of distributed application software} is that today on Facebook if you help identify artists that subsequently become successful by pressing the like button that value goes to Facebook advertisers not the content producers, not you. On Ethereum on the other hand both the content creator and the early adopter will be rewarded for identifying that artist. Its a brand new revenue model that never been seen before and it can completely revolutionize the way we think about revenue on the internet today.

Reddit

One has to wonder what Reddit has in store for their community after it was disclosed on Reddit to much fanfare (i.e. it made the Bitcoin sub-Reddit front page) that Reddit is hiring a couple of Cryptocurrency Engineers. While it is conjecture on my part, the shift towards users not just participating in the network but creating value based on their interaction with it cannot be dismissed.

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No I’m not referring to the Incubus song, although I like where your head is.

Rather, Jed McCaleb’s new project (formerly secretbitcoinproject.com) has finally come to fruition. Today users who signed up to be alpha testers received an email which introduced the new project: “Stellar”.

Before we begin, I would like to caution you that this article is not intended to give a full technical breakdown of any of the protocols described within. Any information presented is intended to convey a very basic level of understanding. Many aspects of the programs have been left out. There is also quite a bit of conjecture on my part. Though I have tried to be relatively unbiased and present the facts where there are facts and my interpretation of events where interpretation is needed, you may see things differently. I encourage you to post those differences in the comments so that we can talk about them further!I have a financial stake in both the Ripple network and the Stellar network.

For anyone who is familiar with Ripple, Stellar will sound quite familiar to you. This is because Stellar is essentially a carbon copy of the Ripple project of which Jed was a founding member. Ripple was Jed’s biggest pet project after selling Mt. Gox. Though it has received seemingly infinite amounts of scrutiny, it has also arguably seen quite a bit of success in its resiliency.

The question is: Why would Jed ditch Ripple and create basically an exact copy of it? For that, we have to speculate a bit.

Before we go there however, the following is a quick-and-dirty rundown of what Ripple is and what it provides for those who are not already aware. I will not get very technical here; for that you can go to their website.

Ripple was created to provide a network that could seamlessly convert any one currency to any other in the middle of a transaction. Let’s say that we only hold U.S. dollars because that is the only currency we trust. We see that Alice is selling key chains online and they are really cool, so we decide that we are going to buy one. There’s one problem though… She only accepts Euros.

Since we only have dollars, this would normally necessitate the conversion of USD to EUR and then somehow conveying that to Alice in Europe. All of this can be quite costly and time consuming. In many cases the international wire fees would cost more than the trinket to begin with. Usually, we would just forget about the key chain and move on.

This is where Ripple came in. Ripple created a cryptographically based network where users could hold any currency they wanted, and send any amount of that currency to another user. The transaction would be confirmed in seconds, and in those seconds between remittance/receipt, the initial currency would be converted automatically to whichever currency the receiver preferred. Ripple does this by providing a third “currency” known as ripples (XRP). Ripple the token is used as the third party to any currency exchange on the network. Thus, USD would be converted to XRP at the best possible rate and then converted to EUR at the best possible rate. This exchange can actually be done through any number of currency combinations, resulting in the best possible exchange rate on the market every single time. The best rate is determined through a built-in process known as “pathfinding”.

This is essentially what Stellar is as well. So why the fork? Again, much of this is speculation, but I will attempt to come up with an explanation here.

It is well known to the Ripple community that Jed had a falling out with the company that currently runs the core development of the Ripple Protocol – Ripple Labs. The first thing to understand is that Ripple Labs is a for-profit entity. All ripples were pre-mined just like stellars were on Stellar. These ripples were allocated to founders, early stage investors, and Ripple Labs. Like Stellar, the majority of the internal tokens were set aside by the core development entity for free giveaways. These giveaways would be used to promote the adoption and subsequent health of the network. In Ripple’s case however, these giveaways and the exact nature of ripple distribution have been a bit foggy since the very beginning. This has brought enormous amounts of scrutiny from bitcoin enthusiasts and is still one of the main arguments against the platform itself.

It appears as though the decision to basically fork Ripple stems from a philosophical issue. Ripple Labs seems to have changed directions from Jed’s initial vision of Ripple. According to Jed, the initial vision was to provide a way for regular people like us to send payments in any currency, anywhere in the world, at little-to-no cost.

It appears as though Ripple Labs has decided to pursue other outlets for their platform by way of acting as a sort of back-end clearing house for financial institutions. This change in the tide appears to have been at the cost of basically ignoring the common user.

Because of this difference in vision, Jed stepped down from all of his responsibilities at Ripple Labs. He then announced to the community that he would begin selling what was left of his enormous founder's allocation of XRP on the open market. As one can imagine, this caused a crash in the value of XRP, since his one founder allocation would be enough to wipe out the entire order book of offers across all currencies on the network. Afterwards he would have still had an obscene amount of XRP left. In case you were wondering, he never dumped the entire amount all at once.

In comes Stellar. Mechanically it appears to be almost, if not the exact, same platform as Ripple. However, I can spot two key philosophical and one key mechanical difference right off the bat, and there may be more.

The first mechanical difference that I see is the total amount of Stellar that will ever exist. Instead of being a fixed amount like bitcoin or ripple, 100 billion stellar was created in the genesis block and more will be generated at a fixed rate of 1% per year. This introduces some degree of inflation which can arguably be good or bad depending on your perspective. The two main arguments in favor of the mechanism, according to the foundation, are to account for both lost stellars as well as economic growth. This 1% is allocated weekly to the top fifty accounts voted to receive such a distribution by the community. The foundation’s hope for these inflationary funds is that “holders will use the inflation-generated stellars to enable novel business models or to fund causes they support".

In the first philosophical case, the Stellar Development Foundation is a 100% not-for-profit entity. Its only goals are to provide support/development for the Stellar network as well as “expand financial access and literacy worldwide”. All of this can be found in their mandate. It will not take any profits and only allocated 5% of the genesis stellar toward financing future operations. For the rest of the genesis stellar the breakdown is as follows: 50% dispursed to the “direct signup educational program”, which involves giving users who create new wallets some stellar. Then 25%, the “increased access program”, will be given away to nonprofits that aim to support the underserved/under-banked populations across the globe. Finally, 20% of the genesis stellar will be given away in the “bitcoin program”, which aims to give back to both the users of Bitcoin and Ripple. Without these two protocols, Stellar would likely not exist. It could also be argued that Ripple is included due to the crash that followed Jed’s intent to sell announcement. This ended up costing many users quite a bit of money.

The second philosophical case is a big one. I mentioned previously that Ripple Labs appears to have switched gears from being user-focused to business/institution-focused. From all angles that I can see, Stellar looks to be targeted towards the regular person. Stellar wants to be what Jed wanted Ripple to be originally; a wallet for the everyday person to side-step the big, bad legacy financial system and support payments from person-to-person across the globe at little-to-no cost. One can see the individual focus all over their website, and especially throughout their mandate. Stellar is very focused on financial literacy and accessibility which absolutely starts at the individual level.

There you have it. In my opinion, this is what caused Jed to essentially fork Ripple and pursue his original vision for the technology. In the interest of full disclosure, I have had a significant stake in Ripple for quite some time now. I also plan on pursuing a significant stake in Stellar.

In any case, it will be interesting to see how both networks play out in the long run. Due to the difference in objectives, it may be that Ripple and Stellar can coexist and both be wildly successful. Only time will tell.

If you are interested in seeing what Stellar is all about, I encourage you to sign up at http://www.stellar.org. For creating an account and linking your Facebook profile to it, you are credited with 5,000 stellar. If you confirm your email address, you receive another 1,000 stellar. Finally, for testing the network and sending 1,000 stellar to someone else you are credited with another 1,000 stellar.

As an added bonus, if you send your 1,000 stellar to me, I will return 500 of it back to you as a win-win for the both of us. You get 1,500 stellar instead of 1,000 and I get some extra stellar as a tip. Full disclosure: there are better offers on the Stellar forums, but if you enjoyed my article and are feeling generous I would love to work with you!

My Stellar username is: mjroncone and if that doesn’t work the address is: gPcDRFkyksJh5o53Lr8dbEfH7KSYfaPvMv

If you are reading this article and are not a member of LetsTalkBitcoin.com, I encourage you to go here and sign up! (Caution: referral links) That way you can send me a private message or ping me in a thread by using @Mike if you have any questions or if I have failed to return your 500 stellar.

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Why NY’s Lawsky hopes to kill off Bitcoin and how he’s asking the crypto community to give him a hand.

Backup (editting by dhimmel):

Enter Benjamin Lawsky, reaching out to the Bitcoin community and showing he is a man of the people.

I suggest otherwise at best a politician at worst a wolf dressed in sheep’s clothing.

Bitcoin is Lawsky’s dream ticket to acceptance by the banking elite, as a New Yorker for many years and having witnessed the division between wealth and public office it has been clear to me since the outset that Lawsky would use the promise of reigning in of Bitcoin to further his financial relationships.

Maybe ask yourselves with whom did he spend more time discussing the importance of Bitcoin, Jamie Dimon or Marc Andreessen, Jim Gorman or Fred Wilson?

It’s imperative that everyone takes a deep breath and calms down, this is not the end of Bitcoin or the decentralised movement but it will be shaken more than needed if anyone buys that he has any interest in cultivating innovation and change.

Lawsky’s proposal has made it ‘very clear’ that folks this is war. A David and Goliath war, decentralised logic versus the centralised behemoths from whom he seeks approval.

Let’s look more closely at his plan, a plan I suggest that has been carefully hatched in accordance with the bankers he seeks to protect. A plan that is designed to attract support from non-thinking states and countries to mimic his lead and to contain the spread and ultimately the dismissal of digital money.

Firstly his plan depends on NYC’s global influence over financial markets; whilst that seems obvious I suggest he won’t even get domestic buy in.

Sure he will get some states to agree but what about California, how can he expect Californians to agree to a bill that would make participation in innovation conditional on regulatory inspection of purpose. Such suggestions ‘might’ work in NYC and Omaha but not in States where innovation is valued.

Then look at the other financial capitals that will supposedly follow suit, London and Singapore have shown leadership in respect to Bitcoin why would they act to stop it in its tracks, are we now going to see trade leverage used to ensure compliance with US leadership simply to protect the banks that led us to the abyss?

Don’t get me wrong regulation is good, transaction identification is essential but having to register to pass Bitcoin to your friends or developing software that may never even be used? This wreaks of McCarthyism, it’s not hard to imagine Senate hearings where Crypto not Pinko is bestowed upon the technically gifted, where they are vilified for their association with financial innovation.

Prohibition has never worked and has always led to enforcement costs that far outweigh the benefits, only a fool thinks he can contain cross boarder development, when they cannot contain shipment of illicit substances from a known point of production.

This alone points to the obvious futility of the Bitlicense as a deterrent and highlights a more Machiavellian objective. Consider if you will how his ignorance draws you in, in your desire to point out his mistakes and to help craft refinements whilst in return, seeking changes that will never come.

Ignorance or lack of interest is further displayed when you see mention of identity inclusion but with no thought given to how it should be included and what will be done with it once it is. Again another superficial attempt to address a legitimate issue and one that displays the lack of interest in a subject and rather how it might be used to gain assistance in defining robust incarceration.

The essence of the argument against Lawsky’s bill is the apparent lack of thought into how these things might work and why they are important, rather it seems he has simply thrown thoughts over the fence in order to appear active when in fact he wants the industry to help him define a bill that is specifically designed to undermine the existence of decentralised technologies.

Consider carefully any support you offer to guide this bill, as acceptance by Lawsky will be minimal and ultimately he will only use it to refine a casket for digital money, offer him NO assistance and he has nothing, a bill that cannot be enforced because it makes no sense and a challenge to refine it as he simply doesn’t understand the subject.

Leave him to his own devices as he will make mistake after mistake as the technology and the challenge is beyond him and anyone not devoted to the task.

By ignoring his cry for input we buy time for Bitcoin and digital money to further embed it’s way into our lives, help him and you accelerate his desire to kill of a nascent industry that is fundamental to future financial efficiencies.

We should also look carefully at ourselves and what is driving the desire for change, we see everyone rallying around the call for decentralised services to marginalise the banks but tied to that cry is a radical desire to poke the beast.

This last part is just plain stupid as it undermines the importance of the real message, that being the fundamental need to streamline the financial and commercial markets so citizens and businesses enjoy the savings and convenience of P2P transactions.

Allowing emotive crusades to corrupt the success of these essential objectives is naive and counterproductive, ask Charlie Shrem deep down he knows he was an idiot to goad ‘the man’ and he’s now paying the price.

So let’s see what lies ahead, firstly open source projects will officially move offshore yet developers won’t leave their desks, overseas deployment services will emerge to enable anonymous deployment of future initiatives, smart governments will encourage this as they will also offer incentives for developers to relocate so they might enjoy the freedom they deserve, sure the US will try to reach out and restrict development by US citizens overseas but how?

Back in the US, project developers will be given open-source tasks that will not result directly in currencies but rather be innocuous components that if used a certain way might benefit currencies but then again might not.

Digital friendly financial centres will spring up all over the world all competing for exchanges, developers and innovation and in another 5 years, as it won’t take long for the foundations of discontent to be established, Lawsky will realise that he was personally responsible for throwing New York City under the bus having sacrificed potential leadership in the new economy and with it jobs and opportunities and all for no avail.

Lastly I’d like to address the issue of anonymity, this is the scourge that allows Lawsky and people like him the evidence required to persecute Bitcoin and its derivatives.

No matter your need for freedom it will never and can never be allowed to justify the financing of terrorism, slavery, extortion, pedophilia and other crimes that undermine society and to that end the crypto-community need to pull their head in and focus their attention to changing the narrative from anonymity to privacy.

It is fundamental that we pay due respect to the obligation we have to not only protect society from corporate scum bags but also against crimes that destroy families and the innocence of children.

For Lawsky I’d suggest no matter what you do anonymous transactions are here to stay but if you show a willingness to work with the development community towards a decentralised world you will be able to craft laws and technology that will limit its impact.

Lastly beware the Silbert, Circle and other big players that have defined their commitment to Bitcoin and see alternatives (alt-coins) as distracting, they love Bitlicense as it allows them to cement an exclusive position.

The document serves as an introduction to Bitcoin and and aims to cover all information necessary for members of the US Congress to make decisions and includes information on many various subjects such as how Bitcoin works on a technical level, Bitcoins benefits and drawbacks, discussions about mainstream usage of Bitcoin and current and future regulation and laws.

In fact, the update seems to consist only of statistical updates about prices and market caps and minor changes such as updating the list of current exchanges and a short one-sentence addition about the bankrupty of Mt Gox.

With truly big companies such as Dell starting to accept bitcoin and a large quantity of smaller companies getting started around bitcoin the amount of people who is working with companies that has a relation to bitcoin should probably be significant, yet there is no information in the article about the number jobs that will get affected by regulatory decisions.

Proper and good information is the basis of sound decisions and while this document is a decent primer to the technology behind bitcoin and the current tax and anti-money-laundering regulation there is a clear lack of information regarding the social and financial developments as well as informtion on the environmental aspects of handling money.

Brian Cohen will be receiving 10% of LTBcoin disbursements for this article for his research leading up to the finding of the updated article.Read More

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On June 19th, 2014, the United States Patent and Trademark Office (USPTO) published Mastercard International Incorporated’s patent application 20140172633 (13/829421), “Payment Interchange For Use With Global Shopping Cart.” The application was filed with USPTO on March 14th, 2013. Brian Cohen breaks this devloping story.

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The essence of the patent is a system whereby a decentralized currency such as Bitcoin is stored in a secure environment known as a Vault and a smaller unsecured portion of funds are stored in an unsecured Wallet.
With cryptocurrency thefts in the news as the price hovers near $1000 each, Brian Cohen catches another patent in this LTB exclusive. Read More

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Hot on the heels of Chase's mystery patents last month, patent documents from IBM reveal interesting plans for the digital currency market. IBM's new filing is much less vague and even less competitive, it seems; rather than outlining a whole new currency solution, it sounds like IBM plans to unite the currencies of the world to a degree we've never seen... if all goes well. Read More

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BREAKING - Over the American Thanksgiving holiday, the US Patent and Trademark Office published the details of a patent application filed by JPMorgan Chase in August.
The patent suggests Chase bank is attempting to construct a rival digital-cash network with a number of startling similarities to existing Bitcoin protocol- Brian Cohen has first details. Read More